January

Fri 29 Jan 2016
/ Europe

Governor’s lessons on Iceland’s crash

Speaking at an OMFIF City Lecture on 29 January, the governor of the Central Bank of Iceland discussed his conclusions from the financial crisis and the lessons for other countries. The role of capital controls and exchange rate flexibility were key to Iceland's recovery, but for other countries suffering from the crisis - particularly Greece - these policy tools are not available.

Fri 29 Jan 2016
/ Europe

Biculturalism and complexities of Brexit

As a German living in the UK for 40 years, I would like the British to stay in the European Union. With my English hat on, it’s a bit less clear cut. To understand the British psyche, you need a touch of bicultural enlightenment. The more European or German politicians do to convince the Brits to remain in the EU, the more British eurosceptics will say the Europeans are acting for their own advantage. Much depends on how Europe portrays itself in the months leading up to voting day.

Tue 26 Jan 2016
/ Asia Pacific

Chinese storm clouds

Chinese stock markets have fallen 20% this year, with few signals of stabilisation. The PBOC faces serious difficulties in managing the renminbi, under pressure from the US interest rate hike. On offshore markets the Chinese currency is trading much lower than on the official one. But the biggest risks lie within the Chinese banking system. A dangerous accounting malpractice – transforming standard loans into ‘investments’ supporting non-financial intermediaries – appears to be spreading.

Fri 8 Jan 2016
/ Europe

A Chancellor pressed on all sides

Germany has rejected Greek debt relief until Athens shows clear progress in meeting reform and restructuring targets. Together with the Netherlands, Berlin has stated its wish that the IMF participates in the latest €86bn bail-out loan – a course the Greek government now suggests it is rejecting. With the German finance minister’s suggestion last summer of a ‘temporary’ Greek euro exit still in everyone’s minds – and Chancellor Angela Merkel politically weakened by domestic fall-out over refugees – Germany is in no position to make any Greek concessions.

Mon 25 Jan 2016
/ Europe

A necessary correction

Stories that international uncertainty is at some kind of post-second world war high are distinctly wide of the mark. Financial markets and those who write about them seem to be in the grip not so much of collective hysteria, more collective myopia. Stock markets are enduring a necessary correction after some hype-induced 2014-15 overvaluations. And while Chinese growth is indeed falling, it is doing so by an amount (if Beijing statistics are to be believed) identical to that forecast by the IMF a year ago.

Mon 25 Jan 2016
/ Asia Pacific

Chinese volatility revisited

Global markets are fixated on the volatility of China’s exchange rate and concerns about renminbi depreciation, but they should put these movements into a wider context. The currency is falling against a strengthening dollar, but has appreciated against its trading partners over the previous five years. Other major currencies have moved more sharply in recent weeks. Further depreciation would both bring the renmimbi into line with these currencies and increase the government’s claim to capital account liberalisation.

Thu 7 Jan 2016
/ North America

Danger of the super-dollar

The dollar has reached its highest level since the early 2000s, but a buoyant dollar is bad news for the international issuers of $7.6tn of dollar-denominated debt, most of which is concentrated in emerging economies. Further rises in the dollar could prompt another round of global economic chaos. Pressure on countries like China and Brazil is increasing.

Mon 18 Jan 2016
/ Europe

Light in the multicurrency tunnel

Losing Britain as an ally in Europe would not be good news for embattled German Chancellor Angela Merkel. In forthcoming horse-trading, the clear dismay with which Berlin regards the prospect of bidding farewell to a major strategic and economic player from an already weakened EU gives British Prime Minister David Cameron some important negotiating cards. So long as he does not overplay them, his hand in the UK’s referendum on EU membership – likely to take place this summer – is strengthened.

Welcome to the multicurrency reserve system

A move towards dollar depegging has been the worst-kept secret in Beijing for years. So there is no reason for the exaggerated fuss now the Chinese authorities have decided to keep the currency stable against a basket of 13 trading partners rather than the greenback. This is all part of a move towards the much-trumpeted multicurrency reserve system, in which a batch of currencies will be competing for status and value vis-à-vis the dollar.

Tue 12 Jan 2016
/ Europe

Improving EMU’s incomplete architecture

Economic and monetary union faces both shorter- and longer-term problems. Among measures to help resolve issues in the first category, the European Central Bank in December extended its asset purchase programme by six months. Longer-term problems include low inflation. The question is whether quantitative easing on its own is enough to avert the negative spiral of low inflation, or whether other macroeconomic policies are needed to boost aggregate demand.